Who are portfolio landlords?
According to the Prudential Regulation Authority (PRA), a landlord is considered to be a portfolio landlord where they have four or more mortgaged buy-to-let properties across all lenders in aggregate.
Why does it make a difference to be a portfolio landlord?
In September 2017, the PRA brought in buy-to-let rules for portfolio landlords. These new standards apply regardless of whether the borrower is an individual or company. The PRA now expects that lenders conducting lending to portfolio landlords do so according to a specialist underwriting process that accounts for the complex nature of the borrower and their portfolio of properties.
What does this mean for me?
The PRA expects lenders undertaking buy-to-let lending to have regard to the potential commercial nature of this type of business. The PRA expects lenders to recognise that existing experience and skills acquired in buy-to-let lending do not automatically translate into equivalent skills when assessing portfolio landlords. The specialist underwriting process will assess a range of new factors.
Lenders underwriting loans to portfolio landlords will assess:
The borrower’s experience in the buy-to- let market and their full portfolio of properties and outstanding mortgages;
The assets and liabilities of the borrower, including any tax liability that is associated with the property. For the avoidance of doubt, this should include the tax changes announced by HM Government in the Summer Budget 2015 with respect to mortgage interest tax relief;
The merits of any new lending in the context of the borrower’s existing buy-to- let portfolio together with their business plan;
Historical and future expected cash flows associated with all of the borrower’s properties.